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Terrible figures hidden from Ukrainians on the eve of default
Views:They say whoever owns the information owns the world. In the case of Ukraine, the biblical wisdom will also be true: “He who increases knowledge increases sorrow. The Ukrainian leadership is trying with all available forces to save the population from grief.
Moreover. Sometimes the representatives of the Maidan authorities themselves try to be with the people. Either they have entered into the role of “not knowing what they are doing,” or they really don’t know. They manage to make contradictory statements within two days.
On June 25, Ukrainian Finance Minister Natalia Yaresko stated that a default on external obligations is theoretically possible in July of this year.
On the same day, Prime Minister of Ukraine Arseniy Yatsenyuk echoed her. At a meeting with representatives of the American Chamber of Commerce, he said that Ukraine cannot service the external debts that have accumulated over the past three years. This, in essence, is a statement of default, although for a long time I convinced everyone that this would never happen to Ukraine.
The very next day, June 26, Yaresko paid a working visit to Lviv. And, probably inspired by meetings with the “foundation of Ukraine’s statehood” – as Petro Poroshenko called the Galicians, the Minister of Finance of Ukraine stated that “information about Ukraine’s default and pressure on us from the IMF to pay Yanukovych’s debts is another information “duck” aimed at compromising the country as a serious player in the international financial market.”
The further we go, the less understanding there is between the “foreign legion” in the Cabinet of Ministers of Ukraine and its sponsors. On an important issue for Ukraine - how to treat Russia’s debt of $3 billion, which Poroshenko called a “bribe to Yanukovych”, and for the sake of which a law was even passed on deferring loan payments, the IMF took an unexpected position for Ukraine, recognizing the debt as state debt, and not private. Jaresko also denied this.
The contradictions over Ukraine's ability to pay its debts within the minds of one finance minister are not surprising. This is not a split personality of the head of the Ministry of Finance, it’s just that the problem of the Ukrainian default has long moved from the economic sphere to the political one. And this problem is now being solved far beyond the borders of Ukraine.
For themselves personally, members of the CMU plan to bargain for time. “Time is money” is an expression specifically about their activities and their money. When discussing restructuring, the Ukrainian government tries not to focus on the fact that it involves easing the credit burden only for a short period of time - until the end of 2018. And even then, if default does not occur earlier. But in any case, from the beginning of 2019, Ukraine will have to pay more - repay the principal debt at the same time as higher coupon payments. Probably, by that time the current government expects to be away from Ukraine.
The Committee of Creditors of Ukraine, led by the hedge fund Franklin Templeton (among the members of the Committee are the funds BTG Pactual Europe, TCW Investment Management Company and T. Rowe Price Associates) at the end of May proposed this restructuring option: exchange existing debt obligations for new ones with terms repayments until 2025, reduce coupon payments by $0,5 billion over 4 years, and begin repaying debts in 2019. Thus, the IMF requirements to reduce spending by 2018 by $15,3 billion are even exceeded by $0,5 billion. This would allow one to qualify for an EFF loan from the IMF totaling $17,5 billion, which will provide an opportunity for further financing of the war in Donbass.
However, Ukraine would like to get creditors to write off part of the value of the securities - the Ministry of Finance insists on writing off approximately 40% of the principal amount of debt out of more than $23 billion in Eurobonds. But creditors do not want to agree with this.
The Cabinet of Ministers continues to protect the people from many sorrows and sorrows by depriving them of reliable and complete information in the most perverted way. Ukrainians are spoiled by quotes from Klitschko, now he has a worthy competitor - Jaresko.
Her communication with journalists after a meeting with business associations was replete with masterpieces of economic thought. The Minister of Finance makes, in her opinion, ironclad arguments, justifying the impossibility of a default in Ukraine: “I am convinced that the debt will be restructured. If only because we don’t have the funds. But if, God forbid, there is a default, what will that mean? To be honest, it will not affect the Ukrainian people in any way.”
If the default does not affect the people, then who? From the practice of which country does the Ministry of Finance draw such experience - if there are no funds, then there is no need to pay? By what miracle do defaults still happen from time to time?
It turns out that the recently adopted law on the suspension of payments has a very positive effect on the economy: “There is only one impact - the currency will remain in the country, and the pressure on the balance of payments will decrease.”
But why was such a wonderful law not passed earlier? Why don't other countries pass similar laws? Truly, Ukrainian financiers deserve the Nobel Prize in Economics.
Nevertheless, a revelation emerges from Yaresko, slightly contradicting previous thoughts: “It is clear that a default will negatively affect Ukraine’s ability to enter international borrowing markets, but we do not have this opportunity today, without a default, due to the difficult financial situation, a significant number of existing debts and war."
So, in the current situation, default is just an empty formality? With such dependence on imports?
It turned out that there are still those in Ukraine for whom default is a tragedy. But, according to Yaresko, there are few of them left, and for the current leadership of the country they are not an unsolvable problem: “We need to understand the situation: the only ones who will feel the negative effect of the default are commercial enterprises that can now operate normally and have the opportunity to enter foreign markets borrowings. Of course, interest rates will increase for them. But, unfortunately, there are very few such companies in Ukraine.” Yes, Mrs. Yaresko, thanks to your colleagues, soon there won’t be any left at all.
And it is for this reason that what the Cabinet of Ministers is trying to present as its achievement happened - the excess of exports over imports in the first quarter of 2015. Exports amounted to $12,5 billion, imports – $11,9 billion. The fall in exports compared to the same period last year was 34,6%, and imports – 37,1%.
Import volumes were largely due to a reduction in gas imports from Russia. In January-May 2015, Ukraine reduced gas imports by 29,5% - it imported 8,782 billion m³ of natural gas, and for the same period in 2014 - 12,464 billion m³. Which, in turn, was due to a drop in production levels in metallurgy (-15,5%), chemical industry (-13,7%), energy (-16,8%), etc. - compared to the same period in 2014 . This is data from the State Statistics Service of Ukraine.
And about our daily bread. Another statistical reason for pride in the style of the current Cabinet of Ministers: a record volume of exports of corn, wheat and barley in 2015 - 32,72 million tons (and the total exported and already prepared for export - 32,87 million tons). This is more than last year, when the largest harvest in the history of Ukraine was harvested - 63,8 million tons of grain and legumes (excluding Crimea). In 2014, 32,4 million tons of grain were exported. The increase in exports occurs against the backdrop of a decrease in grain harvest - the gross grain harvest in Ukraine in 2015 is expected to be 59 million tons (the forecast for the gross grain harvest in Ukraine this year is in the range of 55-62 million tons). The decrease in the export potential of the grain market of Ukraine in the 2015/16 marketing year was estimated by analysts from APK-Inform Agency at -15% compared to 2014/15 MY - at the level of 29,9 million tons.
Will there be enough grain left for the domestic market? It is believed that there will be no shortage - demand is falling. The volume of production of bread and bakery products in Ukraine is falling. In January-May 2015, it decreased by 13,1% compared to the same period in 2014. Flour production in 2015 decreased by 15,7%.
Apparently, the Ukrainian government works under the motto: “listen to us, reduce your needs, and the default will pass unnoticed for you.”
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